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FTAs may help offset falling export revenue
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The steep fall in exports is prompting the Chinese government to acclerate the free trade area (FTA) strategy to help local manufacturers reduce export costs and also fend off trade protectionism measures.

Chinese exports fell for a sixth month in a row in April, alarming officials who were expecting the decline to ease further last month.

According to the Customs, Chinese exports in April decreased by 22.6 percent from a year earlier and 5.6 percentage points higher than in March.

In March when the decline in exports eased for the first time since last November, many believed that the positive trend would be sustained.

Thanks to the still blurred economic situation in the US and Europe, China's major two export destinations, analysts are not optimistic and feel that the hard times are far from over for Chinese exports.

The Ministry of Commerce, for the first time, admitted in its website that the "situation is severe" and China will be "actively taking measures to boost exports in the months ahead".

"The FTA strategy will be given top priority," it said.

"This signals the Chinese government's intention to invigorate exports through the FTA," said Li Jianfeng, macro-economy analyst at Shanghai Securities.

The FTA is a catalyst for the exports, as under the FTA, nations and regions concerned must lower tariffs and remove trade barriers for each other.

In 2008, Chinese exports to the five FTA trade partners made up for 9 percent of the total, and grew by 20.9 percent year-on-year, 17.2 percentage points higher than the average.

In 2004, China and ASEAN signed the first FTA. Currently China has eight FTAs with 16 nations and regions worldwide, with bilateral trade accounting for one-fifth of the Chinese total in 2008.

But since late 2008, China seems to be hastening the process. It has conducted FTA talks with countries like Chile, Costa Rica, Norway and Pakistan.

The latest FTA to have been signed is the one with Peru inked in late April. The two sides signed a package of deals including commodity, service trades and investments under the FTA framework.

The FTA is also noteworthy as China took the shortest time of a year to conclude the FTA talks with Peru.

"These actions show the commitment of the government in improving the economic situation through the FTA drive amid the financial crisis," said Wu Guoping, senior expert on Latin-American affairs from Chinese Academy of Social Sciences.

(China Daily May 15, 2009)

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